Halloween conjures images of spooky ghosts and goblins. These spectra may not be visible to the eye, but rumor has it, their mysterious presence can be felt.
Similarly, so-called "phantom income" is money that you do not actually pocket, but the IRS still treats these funds as taxable income.
Nobody likes getting a larger than expected tax bill, especially on the money they never had in fact, but because the money (or "phantom income" ) appears on the income statement, it is fair game for uncle Sam
These situations are not very common, but some examples of phantom income :.
non-marital medical benefits
A growing number of employers offer health care coverage national health partners, in addition to legally married spouses.
medical benefits of a spouse are not taxable, but when two people (a couple of the same sex or otherwise) are not legally married, the benefits of non-employees are taxable.
all States not recognize gay marriage, so some employers have begun to "gross" domestic partners benefits, which means that the employer pays income taxes rather than the employee.
However, if both partners have employers who offer health insurance, they should compare the cost and coverage of two plans to see which plan is the most logical.
In some cases, registration for insurance through their own employers can be more profitable and should not pay additional taxes.
income Forgiven
If you have a credit card debt or loans forgiven, the lender can declare the amount on 1099-C IRS form ( "debt Cancellation").
the same can be true of a short sale or foreclosure because the mortgage lender allowing you to walk away from the property without paying the mortgage balance.
While you do not actually get the money, you may still owe taxes on the forgiven amount.
this may not be as scary as it sounds, because there are exceptions to the tax on the forgiven debt.
there was an exception to the mortgage debt that was forgiven by the short sale or foreclosure of your primary residence.
Unfortunately, the law that allowed this exception, the law on Mortgage forgiveness debt relief, expired at the end of last year.
However, the debt forgiven in bankruptcy or if you are not financially solvent is not taxable, so that although the law has expired, you may be exempt from tax debts canceled if your liabilities exceed your assets.
If you are filing bankruptcy or treatment of canceled debts, then you may want to consult a lawyer about the potential tax consequences and avoid unpleasant surprises come tax time.
file IRS Form 982 to exclude discharged debt from your gross income.
Have an S corporation or LLC
people who own these types of business entities can receive money through their S corp or LLC must pay taxes on (ghost) earnings before they receive that income, which can be frustrating.
In the case of a company, however, the company, not the individual, should the tax.
If you configure an S corp or LLC, talk to your business attorney or accountant on how these structures may affect your taxes.
Receive equity in a company
If you invest "sweat equity" in a startup company, while someone else provides the money , receive a percentage of equity in the company could create tax consequences for you.
a way around this might be to the investor giving money to lend money to the company or having the person providing the fairness of sweat buying of equity shares over time.
Consider the potential fiscal impact before you put in place a capital structure for a new business
photo credit :. Brett Kiger via photopin cc
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